1: Regulatory Framework Flashcards
The Financial Services Act 2012 created 3 new bodies in 2013
Financial policy committee (FPC)
Prudential regulation authority (PRA)
Financial conduct authority (FCA)
What is the main aim of the FPC?
Identify, monitor and take action to remove systemic risks to the stability of the financial system
What is the main aim of the PRA?
Regulation of firms including banks, building societies, credit unions, insurers etc..
What is the main aim of the FCA?
Main objectives include:
Consumer protection - protection for customers
Integrity - enhancing integrity of UK financial system
Competition - effective competition in the interest of customers
What are the principles for business?
Statement of minimum standards expected of all financial service providers
List the principles of businesses
Integrity
Skill, care and diligence
Management and control
Financial prudence
Market conduct
Consumers interests
Communications with clients
Conflicts of interest
Customers relationships of trust
Clients assets
Relations with regulators
Consumer duty
What is the role of an authorised person?
Someone who carries out regulated activities such as: mortgage lending etc..
What is an appointed representative?
Firms that are tied to a particular product provider
Senior managers and certification regime (SM&CR)
Senior managers regime - rules made by PRA&FCA relating to senior roles in a firm.
Certificate regime - applies to roles (not senior) that can cause harm to the business/customers
Who does the MCOB rules apply to?
MCOB 1 rules apply to:
Mortgage lenders
Mortgage advisors
Mortgage arrangers
Mortgage administrators
What is the Mortgages and Home Finance: Conduct of Business Sourcebook Rules (MCOB)
It governs the relationship between mortgage lenders and borrowers.
What criteria must be met for a mortgage contract to be regulated: as defined my the MCOB
- The lender must provide credit to the individual or trustees (borrower)
- The repayment by borrower must be secured by a mortgage on land
- Cannot be a loan to a company or a loan to purchase commercial property
What is a higher lending charge
Charge made by the lender when LTV exceeds threshold. Can be referred to as a mortgage indemnity guarantee (MIG)
What is a lifetime mortgage
Product restricted to older customers and won’t seek repayment until customer dies.
What is a home reversion plan
Where an older homeowner sells part or all of their property to a financial provider and become a tenant for life or until property is sold.
What must a European Standardised information sheet (ESIS) include?
- Key features of the mortgage contract
- Price customer will pay including fees
- Any other products such as insurance
What is outlined in MCOB 6 - Disclosure at the offer stage
Once lender has accepted application. It must send the customer an offer document alongside a mortgage illustration/ESIS
What is outlined in MCOB 7 - Disclosure at the start of the contract and after sale
Reconfirming information once the contract has started, it includes:
- Amount of first payment
- confirmation of any other insurances
- Payment collection
- What happens if they fall into arrears
What is outlined in MCOB 8 &9 - Equity release
Rules relation to equity release products which generally related to Lifetime mortgages and home reversion plans.
What is outlined in MCOB 10 - Annual percentage rate (APR)
The APR is a total cost of borrowing for a year. It’s used to compare similar lending products for personal loans, credit cards and HP agreements
What is outlined in MCOB 11 - Responsible lending
Before granting or increasing a mortgage loan lenders must prove they have taken account customers ability to repay it via affordability
What is outlined in MCOB 12 - Charges
Firms must not impose excessive charges on customers.
- ERC must be disclosed prior
- Arrear charges must be reasonable
What is outlined in MCOB 13 - Arrears and possessions
A firm must deal with customers who fall into arrears fairly, which means:
- Fair approach to repayment of arrears
- Changing customers payment dates
- Liaising with any 3rd party creditors
- Only repossessing iff all else fails
What’s covered in the Training and Competence (T&C) rules
- Recruitment - competence of potential employee
- Training - should be up-to date and role related
What is professional indemnity insurance (PI)
Protects you against claims for loss or damage made by clients as a result of the impact of negligent services you provided.
What are the client money rules?
Any money received or held from a client must be:
- Held in a separate bank account
- Banked within 1 day of receiving
- Interest belongs to client
